The game takes place in an Alternate Timeline / "Quantum Reality" where the events of Star Trek: Generations did not occur or at least unfolded in a way which allowed for the survival of the Enterprise with its TV bridge.
See Continuity Snarl on the main page. Perhaps the good ending unfolded in the "All Good Things" future timeline. The game exists in-universe as a simulation challenge for cadets at Starfleet Academy.
This may make Kavok a No Celebrities Were Harmed version of Chancellor Gowron. The bad ending of the game is the real fate of the Enterprise-D.
Generations is a holonovel cooked up by Starfleet to tell the tale of a (slightly more) dignified fate for the Enterprise as opposed to being stolen and wrecked by Not-Gowron. Also, Wolf 359 was an inside job.